‘Nod’ and the Silk Road Drug Bust: This ‘is Turning into a Cluster Fuck’

Steven Lloyd Sadler told a federal judge last week that he isn’t the biggest online drug dealer in Seattle history. “Not guilty,” the 40-year-old onetime Bellevue software engineer and his co-defendant/roommate Jenna White informed a magistrate. Sadler thus effectively denied being “Nod,” which prosecutors claim was his online handle at Silk Road, the billion-dollar black market bazaar where users and dealers bought and sold hard drugs with bitcoins, the online currency.

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Sadler, facing drug conspiracy charges and up to 20 years in prison, also effectively denied being Edward Harlow or Aaron Thompson or any of the others whose names were used to rent more than three dozen mailboxes around Western Washington through which prosecutors say illegal drugs and money passed, including, in one instance, $3,200 cash, and in another instance, nine grams of meth inside a Sports Illustrated DVD case.

Christopher Armstrong, a Homeland Security agent, says he came across one such package in September 2012 and has been on the trail since. A drug-sniffing dog had alerted on an express mail package that traveled through a local postal facility. It turned out to be heroin inside a birthday card. Over the ensuing weeks, Armstrong collected other sniffed-out packages and followed some of them to the mailbox stations. Though Sadler and Harlow and Thompson and the others never showed up to claim them, Armstrong says, a blonde woman in an Audi did. Armstrong discovered the car was registered to Steve Sadler, who lived in a Bellevue condo with a blonde woman named Jenna M. White.

Police surveillance was set up on the condo and an investigation into the twosome’s backgrounds was launched. By March this year, Armstrong, aided by postal inspectors, had also followed a package of drugs to a mail recipient who agreed to cooperate. The informant admitted getting narcotics from an online dealer named Nod on Silk Road, “the Amazon of drugs” where a technology system of rerouting and encryption called Tor is used to protect the identity of users.

The informant didn’t know who Nod was. But the dealer had his own online seller’s profile, along with 1,400 reviews from satisfied customers. “Indeed,” Armstrong would later write in court papers, “his profile states that he is in the top one percent of sellers on the website,” and uses the post office to deliver his goods. “His profile lists cocaine, methamphetamine and heroin for sale in various quantities.” Armstrong did some ballparking with Nod’s sales figures and determined he had been a busy man. In just four months, Nod had dealt 105 grams of meth, 593 grams of heroin, and 2,629 grams of cocaine.

In May, federal agents attached tracking devices to two cars, the Audi and a BMW, owned by Sadler and White. In the following months, the remotely monitored devices followed the cars to 38 post offices around the Seattle area, ranging from Tumwater to Bellingham. Eventually, federal agents made a controlled buy – posing as Silk Road customers and ordering drugs from Nod. They then followed the blonde woman from Sadler’s condo to the post office and intercepted a package addressed to them that she allegedly dropped off, containing 2.2 grams of cocaine.

In July, federal investigators raided Sadler’s Eastside home and confiscated heroin, meth and cocaine along with $4,200 cash, a .45 semi-automatic handgun, and Sadler’s BMW. According to The Smoking Gun website this week, Sadler subsequently began cooperating with agents in their attempts to bring down the Silk Road operation, which had brokered more than $1 billion in illegal online drug sales in 2 ½ years, authorities claim. At an October 2 hearing, federal prosecutor Thomas Woods said “Mr. Sadler has been cooperating, working for the government for the past two months.” But his cooperation “abruptly came to an end this morning,” when Sadler and White were arrested. That was the day after the alleged Silk Road kingpin, millionaire Ross Ulbricht of San Francisco, was nabbed.

Woods didn’t explain why the cooperative agreement ended, although it appears that Sadler had been using his own products. The accused, charged with five counts of drug dealing, told probation officer Hien Nguyen “he last used methamphetamine and heroin the weekend prior to his initial [court] appearance” October 2, according to court records. He later admitted he also “used heroin on Tuesday Oct. 1 and amphetamine on the morning of Wednesday Oct. 2.” He was released on bond and agreed to stay away from drugs, although records show he was found to have taken an opiate inhibitor called Suboxone a week later. He was allowed to remain free nonetheless.

During the time he apparently cooperated, Sadler likely was being asked to identify customers and other dealers. The feds could also have co-opted Nod’s identity – if Sadler was indeed Nod – attempting to reel in suspects, and accessed his computer. On Reddit, a commenter who says he lives in Washington and was arrested as part of the Silk Road crackdown, claims “I bought from a couple dealers in WA state, one of which was Nod.” He said that though the transactions were encrypted, investigators had found his contact info on one of the dealers’ computers. “This whole thing is turning into a cluster fuck,” he said.